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Unintended consequences: Examining the effects of government digital regulation on corporate fintech innovation in China

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  • Tan, Weijie
  • Tang, Qiuyu
  • Sun, Wanting
  • Du, Xuanyu

Abstract

In the financial sector, government digital regulation significantly influences the development of financial technology (fintech), yet it has not been sufficiently studied. This research leverages patent text data from A-share listed companies in China from 2011 to 2021 and digital administrative penalty information from various cities, utilizing machine learning techniques to measure enterprise fintech innovation and city-level digital regulation indicators. Grounded in institutional theory, this study investigates the impact of government digital regulation on enterprise fintech innovation and its underlying mechanisms. The findings suggest that government digital regulation impedes enterprise fintech innovation, as it heightens the overall external environmental risks and increases internal operational burdens for enterprises. Heterogeneity analysis shows that this inhibitory effect is more pronounced in private enterprises, firms with stronger financial stability, and high-tech companies. Furthermore, significant differences exist across various dimensions of digital regulation and fintech innovation. Nonetheless, the study also finds that the synergistic development between government digital regulation and enterprise fintech innovation can produce positive governance outcomes, thereby fostering fintech innovation.

Suggested Citation

  • Tan, Weijie & Tang, Qiuyu & Sun, Wanting & Du, Xuanyu, 2025. "Unintended consequences: Examining the effects of government digital regulation on corporate fintech innovation in China," Emerging Markets Review, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:ememar:v:64:y:2025:i:c:s156601412400116x
    DOI: 10.1016/j.ememar.2024.101221
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    More about this item

    Keywords

    Digital regulation; Financial technology (fintech) innovation; External environmental risk; Internal operational burden; Institutional theory;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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